Office Rents In HK’s Central District Expected To Drop 25% In 2020

HONG KONG – Cushman & Wakefield (C&W) revealed that office rents across the city continued to fall for the sixth straight quarter in Q3 2020, with average office rents declining by 4.7 percent on a quarterly basis and 13.9 percent year-to-date, according to a press release distributed by Media OutReach on Tuesday (6 October).

The property consultancy said the biggest drops were recorded in the Greater Central District, where office rents contracted by 6.3 percent quarter-on-quarter and 16.9 percent year-to-date. This is followed by Wanchai/Causeway Bay, where office rents decreased by 5.2 percent quarter-on-quarter and 15.0 percent year-to-date.

With Hong Kong’s office rental market forecasted to remain sluggish until the end of the year, office rents in Wanchai/Causeway Bay and Greater Central District are expected to fall by up to 23 percent and 25 percent respectively for the whole of 2020.

If the 25 percent plunge in the Greater Central District comes true, it would set the record for the highest office rent decline since the 2008 Global Financial Crisis.

Moreover, C&W shared that net office absorption stood at -633,000 sq ft, the highest drop on record and marks the fourth straight quarter of negative absorption as tenants face a challenging business environment.

For the first three quarters of 2020, negative office absorption collectively reached 1.7 million sq ft. During the third quarter, occupants also gave up 626,000 sq ft of office space, which represents an 8.0 percent rise from the second quarter.

Consequently, the amount of available office space throughout the city rose to 11.6 percent. Kowloon West witnessed the highest office availability rate of 16.6 percent, followed by Kowloon East with 14.9 percent.

“Of the total, 70 percent (of the office) space was surrendered by multinational corporations,” said Keith Hemshall, C&W’s Executive Director & Head of Office Services in Hong Kong.

“This upward trend is expected to continue for the remainder of 2020. However, there are also cases of tenants capitalizing on this opportunity to upgrade their office environment or to relocate within the same district at a more competitive rate”.

Meanwhile, C&W’s Managing Director in Hong Kong John Siu revealed that one of the key findings of its recent office occupier survey is that 65 percent of the respondents intend to let their employees work from home on a long-term basis.

“While that’s certain to alter the office leasing landscape, we do not necessarily see it having a major impact on office demand in the long run. It is likely that much of the work from home will be part-time, perhaps one to two days a week. In addition, as firms look to allow more social distancing within the office, many may look to working from home to offset the need to add to their office footprint.”